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Recently, Oriental Fortune’s semi-annual report disclosed the operating conditions of its subsidiary Tiantian Fund. As one of the “three giants” in fund distribution, Tiantian Fund’s operating income fell by 30%, but its net profit and fund sales achieved counter-cyclical growth.

However, industry insiders interviewed believe that a decline in both revenue and net profit may become a common phenomenon in the fund sales industry in the first half of this year.

In order to cope with the increasingly fierce competition in the fund distribution market, distribution platforms are constantly innovating to adapt to market changes, such as reducing fees and optimizing services to meet new challenges.

Is revenue decline a trend?

According to the latest performance of Tiantian Fund, in the first half of the year, Tiantian Fund launched 19,413 fund products (based on independent fund codes) under 156 public fund managers, achieving fund sales of 851.382 billion yuan, a year-on-year increase of 4.4%. Among them, the sales of non-monetary funds were 499.664 billion yuan, a slight decrease of 0.88% year-on-year. As of the end of the reporting period, Tiantian Fund's cumulative fund sales amounted to 10.86 trillion yuan.

Judging from the above data, Tiantian Fund's fund sales are still growing, but the sales of non-monetary funds have shrunk slightly. That is to say, in the first half of the year, Tiantian Fund's money market fund sales increased significantly and the market's risk aversion sentiment was more obvious.

In addition, industry insiders pointed out that the equity fund sales of Tiantian Fund accounted for a large proportion. However, the stock market has been poor in recent years, and bond funds have attracted more investors due to their good performance. Therefore, it is expected that among the fund sales of Tiantian Fund, the sales of bond funds will increase, while the sales of equity funds may decline significantly.

In terms of performance, Tiantian Fund achieved operating income of 1.417 billion yuan in the first half of the year, a year-on-year decline of 29.64%, and net profit of 64 million yuan, a year-on-year increase of 23.08%.

It is worth mentioning that although Tiantian Fund's operating income continued to decline sharply, Tiantian Fund's net profit stopped falling and rebounded. The net profit was 102 million yuan at the end of the first half of 2022, which was halved to 52 million yuan at the end of the first half of 2023. At the end of the first half of 2024, it stopped falling and rebounded to 64 million yuan, a year-on-year increase of 23.08%.

In this regard, Wang Yi, a researcher at Jinzhang Investment under Ge Shang Financial Management, believes that the stock market fluctuated greatly in the first half of this year, making the sales of equity funds more difficult, which had a certain impact on Tiantian Fund's fund distribution business.

Wang Yi said that the decline in Tiantian Fund's operating income was related to the reduction in fees by public funds. After the reduction in fees, the fund sales companies' share income also declined accordingly.

In addition, Wang Yi believes that the increase in Tiantian Fund's net profit may be related to cost reduction and efficiency improvement.

It is worth mentioning that industry insiders pointed out that the decline in both revenue and net profit may become a common phenomenon and future trend in the fund sales industry. The "Big Three" fund sales agencies are all facing pressure, especially those with a high proportion of active equity funds in the stock scale.

Rong Hao, a wealth manager at Paipai.com, said, "With the gradual saturation of the industry supply side and the decline in fund fees, market competition is becoming increasingly fierce. It is predicted that sales agencies may face a trend of both revenue and net profit decline."

Wang Yi believes that in recent years, the growth of public fund sales has slowed down, and the scale of different types of funds has diverged. The scale of bond, money and QDII funds has increased, while the scale of mixed and stock funds has shrunk. The fee rate reform may continue to have an impact on the revenue and net profit of fund sales agencies. The growth rate of revenue and net profit may continue to decline. Intensified competition and strict supervision may accelerate the reshuffle of the industry.

The Big Three are under pressure

At present, among the "Big Three" in public fund sales, only Tiantian Fund's latest performance data has been released, while the data of "retail king" China Merchants Bank and "internet giant" Ant Fund have not yet been released.

The data on the sales and holdings of public funds by fund sales institutions disclosed by the China Securities Association was as of the end of 2023. At that time, Tiantian Fund's "stock + mixed public funds" reached 402.9 billion yuan, ranking third in the market, a decrease of 24.7 billion yuan from the end of the third quarter of 2023.

From the perspective of "non-monetary market public funds holdings" (hereinafter referred to as "non-monetary scale"), Tiantian Fund reached 549.6 billion yuan at the end of 2023, a month-on-month decrease of 25.9 billion yuan from 575.5 billion yuan at the end of the third quarter of 2023.

This shows that the decline in Tiantian Fund’s agency sales scale is mainly due to the “stock + mixed public fund holdings scale”, which decreased by nearly 6%.

As of the end of 2023, in terms of non-cash scale, the changes in Ant Fund, China Merchants Bank, and Tiantian Fund were relatively small compared with the end of the third quarter of 2023. The holdings of Ant Fund increased slightly by 1.45%, while those of China Merchants Bank and Tiantian Fund declined by 1.57% and 4.50%, respectively.

From the perspective of "stock + mixed public fund holdings", the holdings of China Merchants Bank, Ant Fund and Tiantian Fund have declined significantly from the end of the third quarter of 2023, with a decline of more than 5%. Among them, Ant Fund fell by more than 9% and China Merchants Bank fell by more than 8%.

In fact, the "stock + mixed public fund holdings" of the "Big Three" fund distribution companies have been hit significantly harder.

Wang Yi explained, "Fund sales are affected by multiple factors, including market environment, policy factors and fund company strategies."

Among them, market conditions have a significant impact on fund sales. In recent years, the stock market has continued to perform poorly, and stock fund sales have continued to be sluggish. The bond market has performed well, and bond fund sales have been relatively good. In addition, policy expectations will affect investor sentiment and thus affect fund sales. In addition, fund companies' marketing strategies and product layout will also affect sales.

Industry insiders pointed out that at the end of 2023, the decline in the "stock + hybrid public fund holdings" of the "Big Three" fund distribution companies has reflected the market's risk aversion sentiment and investors' reduced preference for risky assets.

Rong Hao believes that "under the sluggish equity market, the scale of equity funds held by fund sales agencies has shrunk, resulting in the operating data of sales agencies being worse than in previous years."

Rong Hao pointed out that the changes in fund sales in recent years are mainly reflected in several aspects: first, the rise of independent third-party sales agencies, which have seized more market share by relying on advantages such as traffic and low prices; second, with the help of the ETF trend, the advantages of securities companies have gradually emerged, and the scale of their equity funds has increased significantly; third, the fund sales landscape has evolved rapidly and channel competition has intensified.

Leading sales agencies innovate and seek change

In the past three years, the market has been volatile and the difficulty of fund issuance has increased significantly, especially for active equity funds. At present, the competition in the fund agency market is becoming increasingly fierce, and agency platforms need to continue to innovate to adapt to market changes. Recently, many agency agencies have adopted fee reductions, profit sharing, and service optimization to cope with new challenges.

For example, China Merchants Bank recently announced that it will fully implement a preferential policy of 10% off the purchase fee for agency sales of public funds, covering all online and offline channels, all fund categories, and subscription fee types. It is understood that China Merchants Bank has cumulatively sold more than 12,000 public funds, of which more than 90% have zero subscription fees or 10% off subscription fees.

Previously, Bank of Communications also announced that in the second half of 2024, the open-end funds it sells on behalf of others will continue to offer a 10% discount on subscription and fixed investment fees.

The trend of reducing fees is not limited to banks. This year, Ant Fund launched the "Saving Center" function, which not only highlights the estimated savings on the fund subscription page, but also prompts users on the overall holding page to indicate the amount of savings in different years since holding the fund and the cumulative amount.

Data from Ant Fund shows that as of June 30 this year, based on a 10% discount on its subscription fee, it is estimated that users will save more than 1.8 billion yuan in transaction fees in the first half of 2024.

In addition, services are also being optimized and upgraded. Since the end of last year, Ant Fund launched the upgraded version 4.0 of "Ant Financial Golden Selection", which not only improved the track of debt-oriented and equity-oriented fund sectors, but also added the Golden Selection Index Fund sector. In the second quarter of this year, the 2.0 version of Zhi Xiaobao, the "AI Financial Assistant" under Ant Group, was tested externally.

Recently, JD Finance App launched the "Steady Loss Must Be Refunded" activity, which selects some pure bond funds with a holding period. If investors lose money in the first holding period after buying, they can apply for a refund of sales service fees. During the "618" period, JD Finance held a "0 yuan purchase of index funds", with no application fee/subscription fee for index funds and redemption fees as low as 0% off.

Tonghuashun App also launched a zero-discount financial management card at the beginning of this year. After users receive it for free on the platform, they can use it to offset the subscription fees of most funds within the validity period, with no upper limit on the amount.

It is worth noting that in recent years, the fund distribution industry has entered an era of great waves and survival.

Data from the China Securities Investment Fund Association shows that there are currently 417 sales institutions in the public offering industry, and only two institutions have obtained fund sales licenses in the past four years.

At the same time, licensed sales agencies are accelerating their liquidation, and public funds have terminated cooperation with some sales agencies with small holdings and high sales fees. Since 2024, dozens of fund companies have announced the termination of cooperation with some sales agencies.

"Faced with challenges, fund distributors should strengthen their compliance awareness, innovate their business models, improve their competitiveness through differentiated and distinctive services, enhance customer experience, provide personalized services to enhance user stickiness, and enrich their product lines, such as adding bond funds and other product lines to diversify risks." Wang Yi said, "Intensified competition and strict supervision may accelerate the reshuffle of the industry. Fund distributors need to adapt to market changes and optimize their sales behavior and management capabilities."